Banking Regulation and Risks

BANKING REGULATORY COMMISSION AFFILIATED TO THE CENTRAL BANK INTRODUCTION After the great depression the recent global financial crisis that erupted in 2007 was an event which had sabotaged the entire world’s financial system. The major effect of the global financial crisis was observed in the USA and Europe…

Introduction

The banks are now on a constant quest to out-wind the effects of the global financial crisis and encounter a new business era. The change in the regulatory framework of banks has been observed globally. The practices of the banks of increased regulatory requirement have are hindered the banks from progressing (Ernst & Young, 2011). Hence, this report aims to highlight the effect of the global financial crisis on the regulatory framework of the banks. It will signify the need for the banks to alter the global banking landscape. This has become mandatory so that the system can run smoothly and performance can be optimized while developing capability to sustain any such economic shocks in future. SECURITIZATION The financial engineering based process of pooling certain types of assets so that they can be converted into interest bearing securities is called securitization. The asset in turn derives interest and principal payment for the individual who has purchased the securities (Jobst, 2006). This concept began in 1970’s in the US. The agencies which were backed by the US government pooled the home mortgages. By the 1980’s other assets which were primarily important for pooling were gathered and since then the market of securitization grew dramatically (Jobst, 2006). ...

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